Property condition disclosure requires listing all defects

(May 12, 2017) Part of each residential contract of sale in Maryland is an addendum from Section 10-702 of the Real Property Article of the Annotated Code of Maryland (“Section 10-702”).

This code requires that a seller of a single-family residential property deliver to each buyer, on or before entering into a contract of sale, on a form published and prepared by the Maryland Real Estate Commission, either:

1) A written property condition disclosure statement listing all defects including latent defects, or information of which the seller has actual knowledge related to the following:

Water and sewer systems, water treatment systems, and sprinkler systems; insulation; structural systems, including the roof, walls, floors, foundation and any basement; plumbing, electrical, heating, and air conditioning systems; Infestation of wood-destroying insects; land use matters; hazardous or regulated materials, including asbestos, lead-based paint, radon, underground storage tanks, and licensed landfills; any other material defects, including latent defects, of which the seller has actual knowledge; whether the required permits were obtained for any improvements made to the property; smoke alarms; and If the property relies on the combustion of a fossil fuel for heat, ventilation, hot water, or clothes dryer operation, whether a carbon monoxide alarm is installed on the property.

OR

2) A written disclaimer statement providing that: except for latent defects of which the seller has actual knowledge, the seller makes no representations or warranties as to the condition of the real property or any improvements on the real property; and the buyer will be receiving the real property “as is,” with all defects, including latent defects, that may exist, except as otherwise provided in the contract of sale of the property.

So what is a latent defect vs. a material fact? Latent defects are defined as material defects in real property or an improvement to real property that a buyer would not reasonably be expected to observe by a careful visual inspection of the property; and that would pose a direct threat to the health or safety of the buyer or an occupant of the buyer.

A material fact is defined as anything that would affect: 1) the value of the property or 2) a buyer/tenant’s decision to purchase/lease the property or how much to offer to purchase or lease the property.

A real estate licensee in Maryland is required to disclose material facts the licensee knew or should have known that relates to the property. Material facts need to be in writing and disclosed to buyers prior to the time a buyer submits an offer.

Lauren Bunting is an Associate Broker with Bunting Realty, Inc. in Berlin.